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The design of optimal education policies when individuals differ in inherited wealth and ability

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Dario Maldonado ()

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Abstract

In this paper I consider the role of optimal education policies in redistribution when individuals differ in two aspects: ability and inherited wealth. I discuss the extent to which the rules that emerge in unidimensional settings apply also in the bidimensional setting considered in this paper. The main conclusion is that, subject to some qualifications, the same type of rules that determine optimal education policies when only ability heterogeneity is considered apply to the case where both parameters of heterogeneity are considered. This rules imply a widening of the education gap between high- and low-ability individuals in second-best with respect to the first-best gap. The qualifications regard the implementation of the optimal allocation of resources to education and not on the way the optimal allocation in first- and in second-best differ.

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Paper provided by UNIVERSIDAD DEL ROSARIO - FACULTAD DE ECONOMÍA in its series DOCUMENTOS DE TRABAJO with number 003975.

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Length: 20
Date of creation: 31 Jul 2007
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Handle: RePEc:col:000092:003975

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  1. Ulph, David, 1977. "On the optimal distribution of income and educational expenditure," Journal of Public Economics, Elsevier, vol. 8(3), pages 341-356, December. [Downloadable!] (restricted)
  2. Sveinbjörn Blöndal & Simon Field & Nathalie Girouard, 2002. "Investment in Human Capital Through Post-Compulsory Education and Training: Selected Efficiency and Equity Aspects," OECD Economics Department Working Papers 333, OECD, Economics Department. [Downloadable!]
  3. Orley Ashenfelter & Cecilia Rouse, 1998. "Income, Schooling, And Ability: Evidence From A New Sample Of Identical Twins," The Quarterly Journal of Economics, MIT Press, vol. 113(1), pages 253-284, February. [Downloadable!] (restricted)
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  4. Hare, P G & Ulph, D T, 1979. "On Education and Distribution," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages S193-212, October. [Downloadable!] (restricted)
  5. Sourafel Girma & Abbi Kedir, 2005. "Heterogeneity in returns to schooling: Econometric evidence from Ethiopia," The Journal of Development Studies, Taylor and Francis Journals, vol. 41(8), pages 1405-1416, November. [Downloadable!] (restricted)
  6. De Fraja, Gianni, 2002. "The Design of Optimal Education Policies," Review of Economic Studies, Blackwell Publishing, vol. 69(2), pages 437-66, April.
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  7. Stiglitz, Joseph E., 1982. "Self-selection and Pareto efficient taxation," Journal of Public Economics, Elsevier, vol. 17(2), pages 213-240, March. [Downloadable!] (restricted)
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  8. James J. Heckman & Lance J. Lochner & Petra E. Todd, 2005. "Earnings Functions, Rates of Return and Treatment Effects: The Mincer Equation and Beyond," IZA Discussion Papers 1700, Institute for the Study of Labor (IZA). [Downloadable!]
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  9. Armstrong, Mark & Rochet, Jean-Charles, 1999. "Multi-dimensional screening:: A user's guide," European Economic Review, Elsevier, vol. 43(4-6), pages 959-979, April. [Downloadable!] (restricted)
  10. Omar Arias & Walter Sosa-Escudero & Kevin F. Hallock, 2001. "Individual heterogeneity in the returns to schooling: instrumental variables quantile regression using twins data," Empirical Economics, Springer, vol. 26(1), pages 7-40. [Downloadable!] (restricted)
  11. Arrow, Kenneth J, 1971. "A Utilitarian Approach to the Concept of Equality in Public Expenditure," The Quarterly Journal of Economics, MIT Press, vol. 85(3), pages 409-15, August. [Downloadable!] (restricted)
  12. Roger Koenker & Kevin F. Hallock, 2001. "Quantile Regression," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 143-156, Fall. [Downloadable!] (restricted)
  13. Darío Maldonado, 2008. "Education policies and optimal taxation," International Tax and Public Finance, Springer, vol. 15(2), pages 131-143, April. [Downloadable!] (restricted)
  14. Stiglitz, Joseph E., 1987. "Pareto efficient and optimal taxation and the new new welfare economics," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 2, chapter 15, pages 991-1042 Elsevier. [Downloadable!] (restricted)
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